US legislators face tough weekend as debt crisis drags on

US politicians face a hectic weekend after the Democrat-held Senate rejected the Republican-draughted debt default bill that had been passed by the House of Representatives. After President Barack Obama’s warning that they are “almost out of time”, leaders of the two parties are scrambling to meet a midnight Tuesday deadline.

Reuters

Despite the deadlock, Moody’s ratings agency said Friday that the US is likely to continue servicing its debt after the deadline even if agreement is not reached but warned that it might suffer a “negative outlook”.

Twenty-two hard-right Republicans joined Democrats in voting against Speaker John Boehner’s bill in the House. But it was passed by 218-210, only to be thrown out by the Senate by 59-41 within two hours.

US markets fell for a fifth straight day on Friday, meaning that a month of gains has been wiped out in a week due to poor US growth and the political stalemate.

Democratic Senate Majority Leader Harry Reid said he hoped Republican Senate Minority Leader Mitch McConnell would now help work out a final deal.

White House spokesperson Jay Carney derided the House vote as "a political exercise" and pressed lawmakers to "start working together immediately to reach a compromise" that avoids default while reining in the galloping US deficit.

McConnell accused Democrats of "ginning up opposition to everything" Republicans offer but declared, "I eagerly await the majority leader's plan for preventing this crisis."

A key sticking point was the duration of any debt limit increase: Reid rejected Boehner's plan in large part because it would set the stage for another showdown in a few months.

Democrats also opposed a condition that Congress would introduce a constitutional

requirement to balance the budget, a proposal introduced to win support of the Republican right. President Nicolas Sarkozy is advocating a similar move in France.

The US economy hit its 14.3-trillion-dollar (9.9-trillion-euro) debt ceiling on 16 May and has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally. But it can only do so up until Tuesday midnight.